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The demand for tables at a furniture store is fairly regular throughout the year at 2400 tables per year. Each table costs $50 to make. Assume the fixed order placement costs to be $40/order, the holding cost rate to be 20% of the table cost per year, and the lead time to be 4 weeks. Answer the questions below.
What is the economic order quantity, Q? What is the sum of annual ordering cost and holding cost? Suppose the table manufacturer has a constant production rate of 500 tables per month. What is the adjusted holding cost, h?? What is the new economic order quantity Q?, given the finite production rate of 500 tables per month? What is the sum of annual ordering cost and holding cost, given the production rate of 500 tables per month?
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